Developer Isn't Likely To Ease Price

Real Estate Mailbag

November 25, 2001|By Robert Bruss, Tribune Media Services

Question: I am considering buying a town home in a new development. The sales there seem to be slow. I have visited the project several times during the past month. What is the best way to negotiate the sales price on a new home?

Answer: Most home developers and builders are reluctant to negotiate sales prices. The primary reason is such a price reduction will affect appraisals on all subsequent sales in the development.

If you were buying a new house, the developer or builder might be willing to add amenities such as better carpeting, upgraded appliances and landscaping. A town house purchase doesn't offer many upgrade possibilities, but it won't hurt to ask for free upgrades.

However, because you know sales in that town house development are slow, ask how many units have sold and are closed. If the number is low in relation to the total town houses, you know you have negotiation leverage.

Or if less than 20 percent of the units remain unsold, you can be sure that developer is eager to negotiate the sale of those remaining units because they represent his profit.

NO TAX SHELTER DEDUCTIONS

Q: My house in Oklahoma has been a rental for 10 years. The last six years I rented it to my son for $250 per month. This is far less than I can obtain from someone else.

Can I deduct a tax loss on this house? If so, how far back can I go? If I make a tax-deferred exchange of this rental property for another rental property and I take out some cash "boot" from the trade, what deductions can I claim?

A: First question: If you rent property below fair market rent to a relative, on your income tax returns you can deduct only the mortgage interest and property taxes. Depreciation cannot be deducted to produce any tax loss. Tax returns can be amended up to three years in arrears. Please consult your tax adviser.

Second question: In a partially tax-deferred Internal Revenue Code 1031 tax-deferred exchange, any cash "boot" or "unlike kind" personal property received is taxable up to the amount of your capital gain profit. Your mortgage balance is irrelevant. What matters is the net sales price and your depreciated book value for the rental property. Again, see your tax adviser for details.

NO SURVEY, NO TITLE PROTECTION

Q: When we bought our home six years ago, we obtained an owners title insurance policy (as you often recommend). Last year we discovered our neighbor's driveway is about 4 feet on our side of the boundary between our lots. I asked him to move his driveway closer to his house.

My lawyer says I should erect a fence along the boundary (roughly in the middle of his driveway). All I want is payment of about $5,000 for his use of part of my lot. He refuses to pay.

When I confronted my title insurer, I was told my owners title policy doesn't insure the boundary location because I didn't submit a survey at the time of title policy purchase. Is this correct?

A: Yes. At the time of property purchase, if a survey is submitted to the title insurer, it is usually possible to insure the boundaries shown by that survey. Because you failed to do so, your owners title policy does not insure the boundaries. For more details, consult a local title attorney.

PREPAYMENT PENALTY IS TAX-DEDUCTIBLE

Q: You have written that payments of home mortgage prepayment penalties are tax-deductible. I paid off my home loan early so I could refinance. But I incurred a $7,100 prepayment penalty. I showed your article to my accountant, but he said I couldn't deduct the $7,100. Please tell me where I can find this tax information, as I am waiting to mail in my delayed tax return.

Q: I am interested in a reverse mortgage with no payments for my house. But I can't find Fannie Mae listed in the telephone book so I can get one of those mortgages. How can I contact Fannie Mae?

A: Fannie Mae does not directly originate reverse mortgages for senior citizen homeowners who are at least 62. You'll need to go through a local reverse mortgage originator.

Also, compare the Federal Housing Administration and Financial Freedom Plan reverse mortgages available in most areas. The easiest place to find a nearby reverse mortgage representative is at reversemortgage.org. Or you can phone 1-800-732-6643.